Digging for Victory
ARSÈNE WENGER, the Arsenal manager, has shown the value of bringing on fresh talent during his team’s successful run in this year’s Uefa Champions League.
The same approach also pays dividends for fund investors. They need to be searching for the next generation of star managers because the old ones won’t be there for ever.
So who are the hidden gems waiting to be discovered? Two fund managers who have caught the attention of several experts are David Stevenson and Andrew Kelly. James Calder, of Berry Asset Management, the wealth manager, says: “They ran SVM’s UK Opportunities fund for five years to last October and carved out a good track record, but they are still not well known. Britannic Asset Management signed them up to run Cartesian UK Opportunities as a joint venture.
“They aim for absolute returns — to make money whether stock markets are rising or falling — and they did well in the recent bear market. With the backing of Britannic, their virtues are set to become known to a wider audience.”
Another man who is poised to acquire a much higher profile is Phil Doel, the newly appointed manager of F&C’s UK Opportunities fund.
Mick Gilligan, director of funds research at Killik & Co, the stockbroker, says: “Mr Doel is going for a very punchy approach. He holds a highly concentrated portfolio of 25 stocks, each of which accounts for about 4 per cent of the portfolio.
“He operates as an out-and-out stockpicker, with each share selected being a real conviction buy. This style produced good results at DWS, his previous employer, where his fund was ranked 19th out of 272 over three years.”
David Urch, manager of SWIP’s UK Opportunities fund, is not on the radar of many private investors, but he should be. Paul Ilott, of Bates Investment Services, the independent financial adviser, says: “He has been running his current fund since January 2003. It has returned 93.6 per cent, putting it 64th of the 293 funds in its sector.
“He runs a concentrated portfolio of 30 to 40 stocks, with an unconstrained mandate, which allows him to buy anything from large-cap to very small-cap stocks, and he analyses his portfolio holdings in great detail.”
The final hidden gem is probably the least well known, though he has an impressive pedigree. Chris Davis, of Davis Associates, is the lead manager of the HSBC American Growth fund. He is part of a family firm of investment managers in the US that goes back three generations. Danny Kemp, of Christows, the wealth manager, says: “Their approach is to buy well- managed businesses that have strong balance sheets. Stocks are bought at attractive prices and held for the long term. Despite outstanding returns, Davis Associates is a quiet force in its home country and virtually unknown in the UK. We expect this to change now that it is linked with HSBC.”
Magnus Grimond:
Start here for pay dirt
ANYONE seeking undiscovered investment opportunities should roll up their sleeves and rummage through the much neglected investment trust sector.
Peter Walls, who runs the Unicorn Mastertrust fund of investment trusts, says that some of the newer funds look interesting. He picks out EP Global Opportunities, a trust with an international investment remit set up at the end of 2003 by Edinburgh Partners, an investment boutique.
Mr Walls says that the fund has a good track record, picking companies liked by the managers rather than geographical or industrial areas.Mr Walls says: “They are not going to track an index, but they will invest in what they like anywhere in the world.”
Another newcomer highlighted by Mr Walls is Cayenne Trust. This was called Invesco City & Commercial Trust until January, when management passed to Cayenne Asset Management, run by Len Gayler, a former equity and bond dealer with the investment bank JPMorgan.
Mr Gayler’s Irish-listed Apollo hedge fund claims to have generated stellar compound returns of 15 per cent a year during its eight-and-a-half-year life. Mr Gayler is now in the process of raising a further £45 million for the £15 million Cayenne Trust.
He is aiming for “absolute returns” — making gains whether the wider market is rising or falling — which he says appeals to the clients of private client stockbrokers backing his fundraising.
Charles Cade, an investment trust analyst at WINS Investment Trusts, a specialist stockbroker, is also a fan of
EP Global, along with Midas Income & Growth. The old Taverners Trust has been transformed by Simon Edwards and Alan Borrows, two former managers of the Merseyside Pension Fund. Midas is aiming for a yield of 4.25 per cent and seeking growth without taking too many risks.
For those ready for more excitement, Andy Gadd, of Lighthouse, the independent adviser, suggests Baring Emerging Europe. “This is a high-risk area, but because it’s a closed-end fund, the manager can take a longer-term view,” he says. Nearly half the fund is in Russia, but it also includes investments in Hungary, Turkey and other Eastern European countries.
Finally, Tom Tuite-Dalton of the stockbroker Arbuthnot, highlights Law Debenture, a global trust which is unusual in having a trading business tacked on. Mr Tuite-Dalton says that the valuation of the trust takes no account of the value of this operation.
In summary, there should be something for all tastes even among the newest investment trusts.
From The Times published on April 15, 2006
